Week in a Glance: OPEC+, NFP, Pandemic & Stock Market Records

5 juil. 2021

The Delta strain is an increasing threat to the world. At least if you look at the dynamics of daily cases of diseases in the UK, Indonesia, Russia and a number of other countries. For example, in the UK, a couple of months ago the show was less than 2K. Last week it exceeded 27K (!), that is, it grew almost 15 (!) times. And this is in a country with one of the highest vaccination rates in the world.

But the markets tried not to consider it. The US stock market, for example, updated historic highs almost every day. Against the background of Friday's data on the labor market, growth quite naturally continued. The figures for NFP came out better than forecasted (+ 850K against the forecast of + 700K) and showed that the labor market is in excellent shape.

At the same time, it should be noted that, purely statistically, the growth of the US stock market in recent years bears signs of an anomaly: more than 280 days without a 5% decline from the S&P 500 index highs (while the average time interval between falls of 5% or more is 178 calendar days) days).

The most obvious reason for the start of a correction in the stock market is inflation in the United States. Given that the driving season in the US is approaching its peak and oil prices are still at their highs, it is hardly worth counting on a sharp improvement in the inflationary situation. And if so, then the Fed will have to at least step up verbal interventions. By the way, the minutes of the last FOMC meeting will be published on Wednesday, and it is likely that they will contribute.

The main event of the past week was the OPEC + meeting. Everything went to increase oil production by 400,000 barrels per day every month from August to December. But literally a minute before the announcement of the final decision, the United Arab Emirates blocked the deal because they were not satisfied with their own production quotas, which they wanted to expand. On Friday, negotiations continued, but to no avail. Accordingly, the announcement of the decision was postponed for a week. So the oil market will be volatile this week too. Our position is still unchanged: we are selling oil in anticipation of an increase in production from OPEC + or the collapse of the association altogether.